Sears’ March Toward Bankruptcy: Gradually, Then Suddenly

Sears was a pioneer in catalog shopping, the creation of the department store, the boom in suburban regional malls and the advent of powerful private brands. They even sold houses through the mail. Years ago, when I was an executive at Sears, I remember sitting in focus groups and hearing some customers talk glowingly about how Sears was the only company to give them a credit card when they got out of school and how nearly everything they bought for their first home came from Sears. Kenmore. Craftsman. Diehard. All iconic.

I get the disdain for Sears too.

Consumers have suffered through years of mismanagement and, at times, what seemed like episode after episode of willful neglect. Long-term employees have seen their pride turn to embarrassment and sorrow. Investors have endured a roller coaster, with each plunge from the top growing deeper and deeper.

What I don’t get is the wishful thinking.

Despite more than a decade of steady declines in performance, despite the absence of a coherent turnaround strategy, despite the massive operating losses, some investors return to the stock like they might return to a bad love affair. In fact, since the company stated last month it had substantial doubt about its ability to survive, the stock has rallied. And some pundits continue to opine on the various ways Sears could survive as a leaner, meaner version of its storied past. Don’t be fooled.

Since Eddie Lampert still has a few things to sell to raise the mountain of cash necessary to fund ongoing operations, it’s possible he can stave off bankruptcy a bit longer. But make no mistake, the end is in sight.

It turns out that Sears is having a hard time unloading some of its few remaining significant assets, most likely because potential buyers realize their value declines along with Sears fortunes and that they might, in fact, do better in bankruptcy court.

I’d like nothing more than to see Sears survive as a vibrant and sustainable retailer. But, sadly, all the wishful thinking in the world will not change the inevitable.

Now, whenever I think of Sears, I’m reminded of what Hemingway wrote in The Sun Also Rises. When one of the characters is asked how he went bankrupt, he replies mournfully: “Two ways. Gradually, then suddenly.”

A version of this story recently appeared at Forbes, where I am a retail contributor. You can check out more of my posts and follow me here.